European Stocks Surge on Fannie, Freddie Takeover; Banks Climb

[AlphaCentauri]

Source: Bloomberg

European stocks rose the most since March, led by financial and construction companies, on speculation the U.S. government's takeover of Fannie Mae and Freddie Mac will shore up the mortgage market.

UBS AG, the European bank hardest hit by subprime-related losses, jumped 9 percent and Deutsche Bank AG, Germany's largest lender, surged 7.3 percent after Treasury Secretary Henry Paulson said the government will provide short-term funding to the two biggest U.S. mortgage-finance companies and purchase debt backed by home loans. Vinci SA, the world's biggest builder, climbed 4.5 percent.

The takeover of Fannie Mae and Freddie Mac ``is the beginning of the end of the problem,'' Lucy MacDonald, the London-based chief investment officer of global equities at RCM Ltd., which has $100 billion under management, said in an interview on Bloomberg Television. ``We'll see a floor put under financial shares.''

Europe's Dow Jones Stoxx 600 Index climbed 3.4 percent to 281.43 as of 3:53 p.m. in New York, the biggest gain since March 18. The London Stock Exchange said a computer failure caused the longest halt of trading in more than eight years and that it was still trying to re-connect customers.



Read more: http://www.bloomberg.com/apps/news?pid=20601100&sid=azfm5u7ZmoHw&refer=germany

---

did somebody say socialism doesn't work?

[whistle]

1. What is working is fascism, not socialism these bailouts of speculators, hedge funds

...snd international bankers are pure fascism

[WriteDown]

2. Must admit....

I am a little clueless on what you are saying. How is this fascism? I am actually somewhat for the nationalization of Fannie and Freddie. If they were allowed to go out of business, homeownership would virtually cease or be limited to a very wealthy subset of people.

[JDPriestly]

10. Mussolini embraced corporatism.

Hitler was a Nazi. Mussolini was a fascist. Both of them allied themselves closely with certain corporate leaders. Here is a discussion of corporatism and the role it played in Mussolnin's fascist Italy. It's not a great discussion, just a starting point.

Historically, corporatism (Italian: corporativismo) refers to a political or economic system in which power is held by civic assemblies that represent economic, industrial, agrarian, social, cultural, and/or professional groups. These civic assemblies are known as corporations (not the same as the legally incorporated business entities known as corporations, though some are such). Corporations are unelected bodies with an internal hierarchy; their purpose is to exert control over the social and economic life of their respective areas. Thus, for example, a steel corporation would be a cartel composed of all the business leaders in the steel industry, coming together to discuss a common policy on prices and wages. When the political and economic power of a country rests in the hands of such groups, then a corporatist system is in place.
. . .

In Italy, corporatism became influential amongst Italian nationalists, Alfredo Rocco spoke of a corporative state and declared corporatist ideology in detail, Rocco would go on to become a member of the Italian Fascist regime.<2> Under fascism in Italy, business owners, employees, trades-people, professionals, and other economic classes were organized into 22 guilds, or associations, known as "corporations" according to their industries, and these groups were given representation in a legislative body known as the Camera dei Fasci e delle Corporazioni. See Mussolini's essay discussing the corporatist state, Doctrine of Fascism.

. . . .

While classical corporatism and its intellectual successor, neo-corporatism (and their critics) emphasize the role of corporate bodies in influencing government decision-making, corporatism used in the context of the study of authoritarian or autocratic states, particularly within East Asian studies, usually refers instead to a process by which the state uses officially-recognized organizations as a tool for restricting public participation in the political process and limiting the power of civil society.

http://en.wikipedia.org/wiki/Corporatism

[Phred42]

3. But for How long?

From a friend of mine today:
~~~~~~~~~~~~~~~~~~~~~~~~

As you can see the DOW is getting drunk on the news of the Fannie & Freddie "rescue plan." This temporary stay of execution ... is momentary. THEY had ALL WEEKEND to calm and call their friends and explain THEIR SCHEME of just ONE MORE FLEECING! ... and now Joe Six-Pack can rest assured his "investments" are safe ... all the while THE FED inflates the PAPER-DOLLAR into the stratoshpere.

There is NO way THE FED can pump/print enough money into THEIR PRECIOUS SYSTEM now. THEY know THEIR SYSTEM is doomed, and along with it the DOW, but THEY are bent on squeezing the last drop of wealth from the common man before enslaving him with a SYSTEM based solely on credit.

No matter what happens now, the writing is on the wall. Whether it takes three months, or three years? Or ten(and it WILL NOT MAKE IT 10)the PAPER-DOLLAR is finished. Kaput, with a K!

Did you happen to see that Herbert M. Allison (TIAA-CREF)is taking over Fannie, and Richard Syron(Carlyle Group)will be at the helm of Freddie. ARE YOU F***ING KIDDING ME! Where is the outrage toward the foxes being allowed into the hen house now? To what? Clear out what's left?

I am surprised, the MAIN-STREAM-CORPORATE-MEDIA isn't going to have anyone left to pander to?

Bernanke is scared S***LESS. He really doesn't know what to do now, and Sir Alan Greenspan? Well, like the great slugger Barry Bonds. Sir Alan will have an even BIGGER asterisk next to his name.

[Ghost Dog]

7. And a system based on Credit is essentially a Feudal system

where most everyone requires a Master who can provide Patronage that must still in the end somehow be paid for by productive manual and intellectual workers.

[Phred42]

8. BIngo - I owe my soul to the Company store......

[Trillo]

9. Sorry, but that phrase is factually incorrect.

"THEY are bent on squeezing the last drop of wealth from the common man before enslaving him with a SYSTEM based solely on credit."

The debt-based system began long ago.

[Phred42]

11. and we are about to see the endgame

[Javaman]

4. Could someone explain to me how bailing out freddie and fannie with

corporate welfare and thus driving the deficit to astronomical heights helps us out?

many times in the past I have written about how we should be bailing out the home owners with freezing their interest rates and resetting them to the original amount, then turing it into a fixed loan. On top of that, we then offer a stipend until the home owner is able to get back on their feet and begin repaying.

many will still be underwater, but will still be able to pay their mortgages, banks would recover, abet not quickly but over time with smaller amounts of cash coming in, the housing market would still be flat but I believe wouldn't die such as it is doing now, but whatever.

I was flamed like there was no tomorrow.

Now since we live in the "less control", "smaller government" republican insane times, corporate welfare queens go to town on our dollar.

So do you think that these corporate bail outs will help all those people who were laid off by these same corps?

I think we know the answer to this.

this "bail out" is nothing more than a giant gift to the power makers to destroy the middle class.

to quote moron*, "mission accomplished".

[WriteDown]

5. Sure, I will be glad to...

Fannie and Freddie enable homeownership for the vast majority of Americans. If they were to fail, only the rich would be able to own property. I myself bought my first home through an FHA first time buyer program and would not have been able to otherwise. Since property is really one of the number one paths to wealth, we really don't want to close off this avenue. This is less like a bailout and more like nationalization which in this case is a good thing.

[Javaman]

12. So only the rich would be able to own property????

I fail to see how bailing out or nationalizing the institution that created imaginary hedge funds whom only the very wealthy were invested in and lost huge sums qualifies as being the only vehicle in order to save us all. The mortgage, banking and the macs are symbiotic.

all this is doing is borrowing from paul to pay peter. who in this day in age is going to buy that much in T-bonds to fund this "nationalization"?

once again, bailing out the rich and screwing the poor.

if you want to save the people and have them have affordable loans to buy houses in the future, making a huge give-a-way to the rich is not the way to do it. Trickle down anyone?

Help the home owner directly. stop the bleeding. all this is going to do is create yet another bubble.

do you honestly think that the macs will suddenly come to their senses when they get this infusion of funds? LOL that's rich, that's what drove this mess to begin with.

We are so far gone the point of no return on fixing this mess it's terrifying.

let the macs collapse. Set up an advisory board to review the loans. Set an across the board interest rate. Work with the owners and form a payment schedule. This gets money back into the system and immediately effects the economy.

because of all of this, we will now be treated to a national debt so monstrous that it won't be paid off for many many many generations. We are so owned by the world now.

[WriteDown]

18. Yep

Fannie & Freddie are held by a bunch of institutional investors/mutual funds and not "imaginary" hedge funds as you put it. Also, the likelihood of a hedge fund taking a long position on these two stocks is remote at best. This is not an infusion of funds. This is nationalization of the two entities.

[Javaman]

27. Actually, it's now appearing to be a bailout and not a nationalization as you have stated. nt

[AlphaCentauri]

6. The bail out is just a scam

what they are bailing out is the investors, giving them their money back. For average mortgage holder thing will be business as usual, they have to keep up with their 40 years debt.

Tax payers will have to bail out the investors and the Joe Six pack who will lost his job.

[Javaman]

13. exactly on point. all this is about is the rich who lost money on their

imaginary hedge funds. They whined and the repukes came through for them once again.

this doesn't help out the home owner one iota.

[WriteDown]

14. Uh...

Fannie and Freddie were pretty much "common man" stocks. Doubt any hedge funds holds any sizable amount of either of these stocks. How does this help them?

[AlphaCentauri]

20. Investors dump Freddie Mac, Fannie Mae stocks

8/18/2008 4:42 PM

WASHINGTON — Shares of mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) tumbled Monday amid renewed fears that shareholders will wind up with nothing if the government intervenes to bail out the troubled companies.
The Treasury Department late last month gained the authority to boost Fannie and Freddie through an investment or a loan should the companies need their finances propped up due to soaring losses from bad mortgages.

The new government power, enacted by Congress after the companies shares plunged to levels not seen since the early 1990s, for several weeks quieted worries that the companies could collapse.

But investors were spooked once again, after a Barron's magazine article over the weekend, citing an anonymous Bush administration source, reported that the government is pressing the companies to raise more money to guard against losses but doesn't expect the companies to succeed.

...

But denials from government officials have not been soothing investors lately. "Some of these things become self-fulfilling prophecies because market confidence is so fragile," said Karen Shaw Petrou, managing partner of consulting firm Federal Financial Analytics in Washington.

http://www.usatoday.com/money/economy/housing/2008-08-18-fannie-freddie-stocks_N.htm

[Javaman]

22. excuse me while I smash my head against the wall..

the hedge funds were created from trenches which in turn were bundled sub-primes. wealthy investors saw this as a way to make easy money out of nothing. So they heavily invested. However, when the owners of the subprime mortgages chose to default rather than pay, because they couldn't handle the upward refinancing, the money that they wealthy were banking on vanished along with any investment on their part.

Now comes in the government to give out a big payday to the wealthy by taking over the macs and pumping massively debt laden money into it. any wealthy investor that held onto their hedge funds (which I bet was a lot) will now get a sudden infusion of capital on their investment.

while the people who lost their homes to various crooked lenders get screwed.

See???????

[WriteDown]

23. One glaring error in your logic....

Fannie and Freddie have nothing to do with subprime loans. In fact, subprime specifically refers to loans that don't meet Fannie or Freddie guidelines.

[Javaman]

26. then please explain to me why the macs failed? hummm? nt

[WriteDown]

29. Mostly due to limited capital

Most housing markets are seeing decreasing values and many homes are not worth what they were purchased for regardless if they fall into the subprime status or not. Fannie and Freddie did not have the necessary capital to whether a downturn in the market. Fannie and Freddie have zero to do with subprime though.

[Javaman]

30. oh and why was there limited capital? nt

[WriteDown]

32. Lack of foresight?

Very common for companies. You can have the greatest product in the world, but if you lack capital, your product may never get to market and your company may not survive. Depends on liquid assets, operating costs, etc.

[WriteDown]

24. Also...

Just one other thing I was thinking about. A tranche(I believe you termed it as a "trench") is not used to create hedge funds.

[Javaman]

25. sigh...

no you create tranche (thanks for the correction) FROM hedge funds. reread what I wrote.

[WriteDown]

28. quote from you

"the hedge funds were created from trenches"

[Javaman]

31. Then I stand corrected. minor point but understood. it still doesn't

change the premise of my argument.

next.

[WriteDown]

33. Your argument that Fannie and Freddie

failed because of shady subprime loans which is 100% factually false (since subprime is no way involved with Fannie and Freddie)? Not sure how you are trying to argue that.

Actually, tranches are neither used to create or are created from hedge funds. Tranches are an asset pool and are a totally different entities.

[WriteDown]

15. dupe

[Joe Chi Minh]

19. Unfortunately, it is you who has to come through for them once again, isn't it?

[ohio2007]

17. I think the interest rates on loans would have tripled

As it is, nobody is buying overvalued property so the construction industries outstanding loans will still come due.

That bubble should be reported as higher unemployment by late october.

[ohio2007]

16. EU countries heavily invested in the US mortgage racket

The returns were huge for awhile but the greed almost destroyed them so you know they breathed a collective sigh of relief when the Mae's were prevented from going the way of Darwinian law.


Maybe its time to bail out the auto industry again?
:sarcasm:

[Rosa Luxemburg]

21. OK, whose paying this $200 Billion?